Impact of Investment Sentiments on Stock Market Returns in Nigeria

Abstract

This study investigated the effect of investment sentiments on stock market returns on Nigerian Exchange Group for the period of 32years spanning from 1990 to 2022. The study employed four sentiments proxies: consumer confidence index (CCI), initial public offer (IPO), dividend premium (DIP), and turnover ratio against dependent variable stock market returns proxy by all share index. The ordinary least square regression (OLS), error-correction models (ECM), unit root and co-integration test were adopted. The study found that CCI, IPO and DIP all have a positive relationship with stock market return proxy (ASI). Meanwhile, DIP appears to be insignificant. Furthermore, turnover ratio exacts a negative but significant effect on stock market return in Nigeria. The study recommends that investors’ sentiment can have either a positive or negative impact on the growth and progress of the Nigeria exchange group. Also, stockholders should not ignore the significance of fundamental and technical analyses in their investment decision making and in predicting stock prices in developing economy like Nigeria where market integrity is low. Also, it is suggested that behavioral factors be considered in empirical asset pricing models for emerging stock markets.